Oatly Group AB OTLY has reported a better-than-expected fourth-quarter revenue, providing an optimistic outlook for its margins. In addition, the Sweden-based oat-based drink company confirmed that it has entered into transactions for $425 million in financing, both of which have helped bolster investor confidence.
In pre-market trading on Wednesday, the U.S.-listed shares of Oatly Group AB OTLY were up by 13.1%. Despite wider net losses for the fourth quarter at $125.2m, growth in both the Americas and Europe, Middle East and Africa (EMEA) regions helped revenue hit $195.1m, which was above the FactSet consensus of $180.8m as per the company’s filing with the SEC. Revenue had grown by 4.9% compared to the year-ago period, boosted by a 16.0% rise in the Americas and a 1.2% increase in the EMEA region.
The company has taken a significant step in terms of financing, with transactions totalising $425m. A portion of this will go towards supporting the continued expansion of Oatly’s production capacity, making it easier for the company to meet growing demand for its products. Oatly announced recently its plans to build its first production facility in the UK, expected to come online in Q1 2023, which is part of its plan to expand its global presence. The company has also recently invested in an oat processing facility in Singapore, underpinning its commitment to greener and sustainable production.
Despite the net losses for the fourth quarter, which has been attributed to increased marketing expenses and the expansion of its production capacity, the stock market remains optimistic about the future of the plant-based milk company. According to a recent report by FactSet, the company’s losses per share for the period were slightly worse than expected at 21 cents, compared to the FactSet estimate of 14 cents a share. However despite this, revenue growth was sufficient to offset the results, leading to optimism about Oatly’s future.
The fourth-quarter saw Oatly’s expansion efforts continue, with the opening of a new production facility in Utah. Oatly has recently partnered with Starbucks, allowing the coffee company to offer its customers, oat milk for the first time, distributed through around 1,300 Starbucks stores in the US.
With surging demand and a growing interest in veganism, as a result of ethical concerns and environmental awareness, Oatly is in a strong position to capitalise on the trend. Furthermore, recent data indicates that oat milk is becoming increasingly popular as an alternative to dairy milk. According to Nielsen data, sales of plant-based milks were up 29% in the United States by mid-2020, compared with dairy’s 1.5% growth, indicating a paradigm shift in consumption patterns.
The company’s strong projected margins and growth prospects have analysts bullish on the future of Oatly Group AB OTLY, with several rating firms recommending it as a buy order. However, such expansion will attract competitors looking to grab a share of this growing market. This demand has attracted new entrants such as Procter & Gamble, which last year launched a line of plant-based milks under its Olean brand. Similarly, Unilever, the parent company of Ben & Jerry’s ice cream, has announced plans to expand its plant-based brands. These companies, along with smaller independent plant-based milk producers, will present potential competition to Oatly.
Despite this increased competition, Oatly looks set to continue its growth trajectory throughout 2021, with the expectation of a strong post-pandemic bounce. With a rising focus on ethics, sustainability and dietary health, many experts predict that the plant-based milk market will continue to grow, eventually overtaking traditional dairy milk. If Oatly can continue to innovate and build customer loyalty through expanding its range of products, it looks set to be a key player in this expanding market.
